Friday, August 2, 2013

We previously showed hard evidence of the Bank of England's complicit hiding of the truth about the quality of Bundesbank gold stored in the Fed's vaults. A few weeks later in a "completely unrelated" action, the Bundesbank dramatically shifted its recent stance, and demanded that its gold be repatriated into its own vaults (and we now know the impact that has had on the paper-physical paper markets). However, in yet another one of the 'darkest episodes in central banking history' the FT reports, the Bank of England facilitated the sale of gold that was looted by the Nazis after their invasion of Czechoslovakia in 1938. Of course, judging today's central bankers by this ethical (and potentially criminal) behavior of over 70 years ago is unfair but it is notable that the pattern of whatever-it-takes and at-all-costs decisions, coupled with pervasive opacity and stark unaccountability, appear to have been formed a long time ago.

The Bank of England played a vital role in one of the darkest episodes in central banking history, facilitating the sale of gold looted by the Nazis after their invasion of Czechoslovakia in 1938.

According to a hitherto unpublished history of the BoE’s activities in and around the second world war, the UK’s central bank sold gold on behalf of the Reichsbank – which Germany’s central bank had seized from its Czech counterpart – after the UK government had frozen all Czech assets held in Britain following the Nazi invasion.

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The episode has long weighed on the reputation of the BIS. However, what has received less attention is the role of the BoE in the affair...

It would appear they knew what the right thing to do was... but politics meant ignore the ethics for the preservation of the status quo...

...the UK’s central bank prioritised the appeasement of the BIS over the British government’s wishes to freeze the sale of Czech assets.

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The history, written by BoE officials and completed in 1950 but never published, also records that the UK central bank sold gold after this date on behalf of the Nazis – and without waiting for the consent of the British government – on the back of pressure from the BIS.

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The documents also show that Montagu Norman, then governor of the BoE, was opaque in his communications with John Simon, the chancellor at the time, when pressed on whether the central bank still held the Czech gold.